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CSU Report Shows Tax Abatement Program Works

A Cleveland State University study reports the city's residential tax abatement program is working and should stay intact if Cleveland wants to remain viable. The results come a few months before the program is set to expire and City Council will decide whether to keep it as is or make changes. ideastream's Tasha Flournoy reports.

The study released Tuesday by CSU's Levine College of Urban Affairs found abatements increased new residential housing in the city.

And, 60% of owners with tax abated homes surveyed for the report said they wouldn't have bought their home without a subsidy. That rated higher than concerns about schools and public transportation because most of those surveyed did not have children.

Mark Rosentraub, dean of the Levin College, says with so many housing options available, the abatements distinguish Cleveland from neighboring communities. And he says they've helped attract and retain middle class and higher income households.

Mark Rosentraub: What makes Cleveland attractive is that because of the abatement people can buy more house for their money than they can any place else. That's why they'll build a house here. And the day after they buy that house there's more tax for the schools because the value of the land just went up.

The city's residential abatement program was started in 1987 to encourage new construction and eliminate blight in the neighborhoods. It was later expanded. The current program offers a 15-year, 100% tax break on new homes and 10 years for remodeled or improved properties.

Prior to the program Rosentraub says the city had virtually no new housing. So, city officials established abatements to encourage new construction and to eliminate blight in neighborhoods. He says there's a misconception that tax abatements take away revenue when actually the city, schools, and county see a benefit.

Mark Rosentraub: The residential property tax abatement does not cost any money or the Cleveland municipal school district. It actually makes money.

It makes money, Rosentraub says, first by adding new housing where it didn't exist before, increasing the value of the land. Then once those homes are built, they drive up the value of surrounding property, generating additional money for schools. And, third it brings in new residents, which generates income tax.

Mark Rosentraub: And the rate of return for every dollar of abated taxes is a $1.50 in present value.

Councilman Joe Cimperman supports the current abatement program and says the study dispelled some myths about the program. For example, most abated homes in his ward were newly constructed condos. He was surprised to see many of them - more than 300 - were rehab projects.

Joe Cimperman: And that says to me there are people out there that are using existing housing stock and taking advantage of something when in a market when more and more people are abandoning houses. Is, to me, an interesting indication.

Mayor Frank Jackson may not be on board with keeping the abatement program as is. Several weeks ago he suggested he might want to scale it back.

Yesterday in a written statement, Jackson said the study shows Cleveland neighborhoods are places where people live and invest. But, he pointed out that nearly 80% of current homeowners polled would still buy a new home in Cleveland even if the abatement was reduced. Tasha Flournoy 90.3.

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